Running between 4 and 8 November 2024, Talk Money Week is an ideal time to sit down and have an open conversation with your family and loved ones about your financial affairs.
In the current economic climate, with many costs and household bills having risen significantly, talking about money could make a big difference to you and the people you care about.
It’s not just words on a page – research supports that talking about money could help you and your loved ones:
- Make better financial decisions
- Enjoy stronger personal relationships
- Form healthy money habits to last a lifetime
- Feel less stressed or anxious and have more control of finances.
According to a survey carried out by OnePoll in 2024, 43% of Brits think younger generations are more open about discussing financial matters than older generations. And 68% of young people aged between 18 and 24 are comfortable chatting about money with friends.
With all this in mind, here are three essential topics to talk about with your family and loved ones.
1. Consider where and how to invest for long-term financial security
One life lesson it’s never too early to share is that investing can help to grow and protect your wealth. And, if you have adult children who are earning and not investing, this conversation should be top of the agenda.
It’s important to have an emergency fund. Ideally, you should aim to have cash savings that would adequately cover three to six months of normal expenditure. Once that pot is sitting in an easy access savings account, investing excess cash allows you to enjoy greater potential to growth.
If you or your adult children are holding too much wealth in cash, your savings are unlikely to keep pace with inflation. Over time, this will reduce your purchasing power, making it harder to achieve your long-term financial goals.
One way to create a good habit for your saving and investing is to pay yourself before you pay anyone else. On receipt of your regular income, set up an automatic payment to your investment or savings account.
Depending on where you live, you may be liable to pay tax on worldwide income and gains. Even assets outside your country of residence, such as UK pensions, ISAs, and investment accounts, may be assessed and liable for tax where you now live, or may move to in the future. This is a crucial consideration to fully understand before you decide where or how to invest.
Compounding is an important principle every investor should understand. The earlier you start saving, the less money and effort you’ll need to accumulate wealth in the future.
The longer you invest, the more compound growth you are likely to enjoy. So, always invest with a long-term view. It’s generally recommended that you should expect to tie up your funds for five years or more.
Along with taking the appropriate amount of investment risk, each tax saving you make and each pension contribution paid are decisions that will compound over the years. And could combine to produce greater wealth for you.
Read more: 10 practical savings and investing tips for people who live abroad
2. Share your retirement dreams with your partner
Whatever stage of life you’re at, it’s never too soon to start planning for your retirement.
Considering how you’ll fund your retirement is one important aspect of this. And, by working as a couple, you can pool your resources and double any tax-efficient savings and investments.
As well as the financial practicalities, you also need to consider how you’ll spend your retirement.
Ask yourself two important questions:
- What do I enjoy doing that I would love to do more of?
- What dreams have I forgotten I had?
Once you’ve landed on the answers you’re ready to start creating a bucket list of things you’d love to do and places you’d love to go.
If you have a partner, it’s essential to work on this together.
While having your own interests and independence from each other is important, communicating your hopes, dreams and fears for the future helps ensure you agree. Otherwise, developing different ideas for how you want to spend your future could cause friction down the line.
Read more: 4 ways a financial planner could stop you losing sleep over your retirement plans
3. Discuss your estate plan with your children to help manage expectations
You may often discuss your inheritance plans with your significant other or financial planner. But have you ever discussed your estate plans with your adult children?
You may be surprised to learn that, according to CNBC, adult children tend to vastly overestimate the inheritance they are due to receive from their parents. One survey, quoted in the report, said 68% of millennials and Gen Zs expect to receive an inheritance of almost $320,000. Meanwhile, separate research revealed that 52% of millennials anticipated that they’d inherit at least $350,000 from their parents.
And yet, 55% of baby boomers who plan to leave behind an inheritance said they expect to pass on less than $250,000.
Keeping your beneficiaries in the dark could lead them to have unrealistically high expectations of their inheritance. This might cause them to overspend on their current income. Worse still, it could cause family arguments and fractured relationships down the line.
Starting the estate planning process early and giving gifts (within the annual exemption amount) while you’re still alive could be extremely constructive for mitigating a potential Inheritance Tax (IHT) charge.
Read more: How estate planning can help protect family wealth from being eroded by Inheritance Tax
Aligning your goals as a family can help you achieve them more efficiently
If you and your family have opposing goals, dreams and ideals about your money, it could make it harder to stay on track with your savings and plan for the future.
Your financial planner can mediate key conversations between you and your spouse or your adult children, to make sure you are on the same page and help you create a positive vision for your future.
Get in touch
If you would like expert advice to help protect and grow your wealth or would like our support when discussing finances as a family, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning or tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
